Required Based on AASB 13 Fair Value Measurement, do you agree with the CFO’s view? Please explain.
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You are an accountant of an Australian listed company. For the current reporting period, the management of your company is considering to fair value non-current assets. In a recent meeting, the Chief Financial Officer (CFO) made the following comment on fair value measurement: “In practical terms I doubt that an asset measured on any other basis than its current use will provide more useful information to readers. As a result, entity-specific information needs to be considered in the generation of fair value measurements.”
Required Based on AASB 13 Fair Value Measurement, do you agree with the CFO’s view? Please explain.
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- State the appropriate audit opinion that the auditor would require for: A new client has changed its valuation method of property, plant and equipment. It has adopted the Fair Value Revaluation Model to replace the Historic cost measurement method. Whilst the auditor does not object to the change in the valuation model, the new method has a material effect on the financial statements and has not been disclosed. A special meeting was held between the CFO and the Finance Team and the Lead Partner from the Audit team, but nothing was resolved.Presented below are a number of operational guidelines and practices that have developed over time. Instructions Select the assumption, principle, or constraint that most appropriately justifies these procedures and practices. (Do not use qualitative characteristics.) a. Fair value changes are not recognized in the accounting records. b. Financial information is presented so that investors will not be misled. c. Intangible assets are amortized over periods benefited. d. Agricultural companies use fair value for purposes of valuing crops. e. Each enterprise is kept as a unit distinct from its owner or owners. f. All significant post-balance-sheet events are disclosed. g. Revenue is recorded when the product is delivered. h. All important aspects of bond indentures are presented in financial statements. i. Rationale for accrual accounting. j. The use of consolidated statements is justified. k. Reporting must be done at defined time intervals. l. An…The use of fair value accounting for measuring assets and liabilities has been a source of on-going controversy. Critically appraise benefits and challenges of fair value measurements with respect to the global financial crisis.(Define fair value accounting as part of your answer).
- (Assumptions, Principles, and Constraint) Presented below are a number of operational guidelines and practices that have developed over time.InstructionsSelect the assumption, principle, or constraint that most appropriately justifies these procedures and practices. (Do not use qualitative characteristics.)(a) Fair value changes are not recognized in the accounting records.(b) Financial information is presented so that investors will not be misled.(c) Intangible assets are amortized over periods benefited.(d) Agricultural companies use fair value for purposes of valuing crops.(e) Each enterprise is kept as a unit distinct from its owner or owners.(f) All significant post-balance-sheet events are disclosed.(g) Revenue is recorded when the product is delivered.(h) All important aspects of bond indentures are presented in financial statements.(i) Rationale for accrual accounting.(j) The use of consolidated statements is justified.(k) Reporting must be done at defined time intervals.(l) An…The use of fair value accounting for measuring assets and liabilities has been a source of on-going controversy. Critically appraise benefits and challenges of fair value measurements withrespect to the global financial crisis. Explain the issues relating to the Fair Value Hierarchymeasurement (IFRS 13) as part of your answer.Which of the following decision-making process does not require management discretion? a.Determining the level of provision for warranty b.making decisions about whether or not to adopt AASB in preparing financial statement in Australia c.Determining a useful life of property, plant and equipment d.Whether to use fair value or historical cost method to value buildings e.None of the above
- After initial recognition of exploration and evaluation assets, they are measured in the statement of financial position using -Cost model -Either cost model or revaluation model, based on the accounting policy -adopted by the enterprise. -Fair value model -Revaluation model According to PAS 28, Which of the following will not fall under the situation of “existence of significant influence by an investor in the financial and operating policy decisions of the investee but not control of these decisions? -Material intercompany transactions -Power to govern the financial and operating policy decisions of an enterprise so as to obtain benefits from its activities. -Technological dependencies -Participation in policy making process Which of the following is classified under PAS 16 -Property Sold under a Finance Lease Agreement -Investment Property -Property Leased under a Finance Lease Agreement -Machinery Held under a low value Lease AgreementAn assessment of accounting practices for asset impairments is especially important in the context of financial reporting quality in that it requires the exercise of considerable management judgement and reporting discretion. The importance of this issue is heightened during periods of ongoing economic uncertainty as a result of the need for companies to reflect the loss of economic value in a timely fashion through the mechanism of asset write-downs. There are many factors which can affect the quality of impairment accounting and disclosures. These factors include changes in circumstance in the reporting period, the market capitalization of the entity, the allocation of goodwill to cash generating units, valuation issues and the nature of the disclosures. Required: Discuss the importance and significance of the above factors when conducting an impairment test under IAS 36 Impairment of Assets.In evaluating the fair value of net assets in an acquisition the auditor has to gather independent evidence in deciding whether the assessed values are appropriate. Which of the following is not one of the steps the auditor normally would perform in making that assessment? Evaluate the qualifications of the specialist. O Determine their independence from the client. Make the valuations themselves. O Review methodology.
- What do you know about PPE ( property, plant and equipment ? • What range of measures is used to determine amounts for these items in the reports of the individual companies? • Do you think it is valid to add the items, given the measures used? • How would you interpret the total amount for property, plant and equipment in the financial statements? • Compare the measures used by the different companies for similar items. Are there any inconsistencies in how similar items are measured by the different companies? Answer above by seeing 2020 annual report of Coles & WoolWorths AU and evaluate the PPE disclosure of WOW and COL.Recognition is the process of including within the financial statements items which meet the definition of an element according to the IASB’s Conceptual Framework for Financial Reporting. Which of the following items should be recognised as an asset in the statement of financial position of a company? Select one: a. A highly lucrative contract signed during the year which is due to commence shortly after the year end b. A government grant relating to the purchase of an item of plant several years ago which has a remaining life of four years c. A skilled and efficient workforce which has been very expensive to train. Some of these staff are still in the employment of the company d. A receivable from a customer which has been sold (factored) to a finance company. The finance company has full recourse to the company for any lossesWhich ot the following statements is true? a. IFRS requires firms to expense immediately all internal expenditures for R&D costs. b. Under IFRS, the product development portion of R&D is capitalized. c. U.S. standard setters require R&D costs to be expensed because of the uncertainty in judging their future revenue-generating potential. d. GAAP required disclosure of firms’ R&D expenditures assits the investor well. This is particularly true for firms with large R&D expenditures, such as technology firms. Which of the following statements is true? (Select one or more) a. For some transactions U.S. GAAP requires that value changes are recognized on the balance sheet and the income statement when they occur, even if not realized. b. U.S. GAAP allows firms to revalue upward the values of assets whose fair values have increased. c. A write down is necessary if the fair market value (FMV) of equipment is less than the carrying value currently on the books…
